The shock to energy prices caused by the war in the Middle East is a significant headwind, but strong investment and structural reforms under Next Generation EU (NGEU) are supporting growth, notes the Executive Board of the International Monetary Fund (IMF), which has concluded the Article IV Consultation on Greece.
Recent reforms to reduce tax evasion have broadened the tax base and curbed the informal economy, creating some fiscal space to support household disposable income while ensuring a rapid reduction in public debt. The 2026 Financial Sector Assessment Program (FSAP)—the first since 2006—finds that systemic risks in the financial sector were low before the war and remain manageable.
GDP growth is projected to slow to 1.8% in 2026. Although it will be supported by higher public investment and measures to support households, higher energy prices and weaker external demand resulting from the war will weigh on private consumption and tourism.
In the medium term, growth is projected to slow to 1.5%, amid a shrinking working-age population, low labor force participation, and sluggish productivity growth.
Risks are tilted to the downside, particularly due to a protracted war, an escalation of geopolitical tensions, and trade fragmentation, while domestic risks include delays in the implementation of projects funded by the NGEU.
“Upside risks” to inflation stem from further increases in commodity prices, wage increases exceeding labor productivity growth, and higher costs associated with climate shocks.
Assessment by the Executive Board
The Executive Directors agreed with the general direction of the staff assessment. They welcomed the steady macroeconomic growth of the Greek economy, the restoration of fiscal credibility, and financial stability.
Although the energy price shock caused by the war in the Middle East constitutes a significant headwind for the Greek economy amid still-high inflation, the Directors acknowledged that strong investment and ongoing reforms under Next Generation EU (NGEU) are supporting growth.
They welcomed the ongoing improvement in public sector balance sheets, while noting that incomplete private sector balance sheet consolidation and remaining structural impediments weigh on medium-term growth and external balances.
The Directors called for an appropriate mix of macroeconomic and financial policies, as well as the completion of the structural reform agenda, so as to consolidate the stability achieved through great sacrifices, remove supply constraints, and ensure balanced and sustainable growth.
The Directors commended the continued very strong fiscal performance, underpinned by reforms to reduce tax evasion, which has supported the sustainable reduction of public debt and provides room for temporary measures to mitigate the impact of higher energy prices.
They agreed that maintaining primary surpluses and making full use of available European funds to sustain public investment beyond the NGEU will contribute to further reducing public debt and sustaining strong growth. They recommended focusing on efficient public investment and safeguarding social spending.
The Directors emphasized that the response to energy prices should remain strictly targeted and temporary. Further advancing fiscal structural reforms would enhance the effectiveness of fiscal policy.
Directors agreed that risks to financial stability were low prior to the war and remain manageable, as assessed by the 2026 Financial System Stability Assessment Report.
They noted that the banking system demonstrates resilience in stress tests. However, they encourage improvements in the processes for resolving legacy non-performing debt outside the banking system (i.e., non-performing loans to servicers) and the supervision of credit servicers, as well as the strengthening of crisis preparedness and the financial safety net.
The Directors agreed that the quality of bank capital should continue to be strengthened and that additional macroprudential buffers could be considered to enhance resilience, while avoiding procyclicality.
The Directors emphasized that ambitious structural reforms are necessary to support higher, more inclusive, and productivity-driven growth, as well as to reduce persistent current account deficits.
They recommended promoting digital transformation and further reducing regulatory and administrative burdens to enhance competition and boost productivity. Increasing labor force participation and improving workforce skills would help address demographic pressures and support growth.
The Directors also agreed that housing policies aimed at more effectively mobilizing the existing housing stock, complemented by appropriately calibrated measures to support demand, would contribute to improving housing affordability.
Measures to achieve energy security are welcome.